One in four Americans is employed to guard the wealth

One in four Americans is employed to guard the wealth

What’s It Going to Take to Share the Surplus?

More money keeps flowing up to the elite who pay more people to protect money flowing that upward way, even as productive jobs disappear. We trim, blend, and append four 2010 articles from: (1) BoingBoing, Feb 5, on wealth guards by Cory Doctorow; (2) contributor Joel S. Hirschhorn on unemployment; (3) contributor Polly Cleveland of Columbia U on federal debt; and (4) AlterNet, Feb 17, on wealth concentration by David DeGraw.

by C. Doctorow, by J. Hirschhorn, by P. Cleveland, and by D. DeGraw

One in four Americans is employed to guard the wealth of the rich

Santa Fe Institute economist Samuel Bowles says one in four Americans is employed in “guard labor” that could otherwise be used to increase prosperity.

The greater the inequalities in a society, the more guard labor it requires, Bowles finds. This holds true among US states, with relatively unequal states like New Mexico employing a greater share of guard labor than relatively egalitarian states like Wisconsin.

A person born into this workforce has little chance of rising beyond it.

JJS: Or even rising at all it seems.

The Real American Unemployment

Analyzing the unemployment national average in the last quarter of 2009 by household income reveals:

Ten times greater unemployment in the lowest class than in the highest class!

How can jobs be created for the lower economic classes?

JJS: Just asking that question is the biggest part of the problem. It presumes that the only way ordinary people can ever get any money is by working. It overlooks societys surplus — all the money we spend on the nature (and privileges) we use — which is trillions of dollars each year. Rather than share that commonwealth, most critics propose we redirect federal spending.

Federal Debt: Good vs. Bad

The more debt the US sells, the more debt investors buy. Taking the safer path, they avoid riskier but productive private investment in small to medium business — precisely the investments that create the most jobs and products and services per dollar invested. The passive investments crowd out the productive ones.

As a percentage of GDP, inequality loosely parallels debt: at its lowest in the mid 1970s, rising steeply during the Reagan-Bush I era, leveling off during the Clinton era, and rising again during the Bush II era. When President Clinton paid down the debt, we enjoyed a brief economic boom that increased jobs and wages, especially at the lower end of the scale.

Consequently the stimulus — funded by growing the debt — may do more harm than good. Only where stimulus spending helps maintain vital services — health and education — can the benefits outweigh the economic drain of deficits. The pop Keynesian argument for the stimulus disregards both the smaller bang from the stimulus buck, and the damage from swelling the debt.

JJS: Investing in health and education is one argument. Saying that the funds must be tax dollars is a separate argument. If we let the politicians do it, the bureaucratic overhead and insider favors could cost more than simply disbursing a dividend to the citizenry and let them choose the doctors and teachers who suit them best. Otherwise, when you demand your favorite subsidy, you legitimize subsidies in general. Then everybody scrambles for the public pie, and insiders with clout get by far the lions share.

The Richest 1% Have Captured America’s Wealth

While the bailout of Wall Street is hopefully a one-time event, it has swollen and could double our national debt, now at a record $12.3 trillion. The interest Americans pay on it is $500 billion every year.

In 2009, just over $1 trillion tax dollars were spent on the military. Yet 25% of military spending goes unaccounted for every year, not to mention the billions spent on overcharging and outright fraud. It’s safe to say that at least $350 billion was needlessly wasted.

Students graduate with record levels of debt from student loans. Meanwhile the unemployment rate among recent college graduates has risen higher than the national average.

“There are two ways to conquer and enslave a nation. One is by sword. The other is by debt.” — John Adams

Three years ago when workers lost on average 25% off their 401k, the wealth of the 400 richest Americans increased by $30 billion to $1.57 trillion, more than the combined net worth of 50% of the US population: 400 people have more wealth than 155 million peopled.

The economic top one percent of the population now owns over 70% of all financial assets, an all time record.

JJS: To bring down the cost of living, you cant spend taxes on social programs. To close the income gap, you cant make up jobs. What you can use is geonomics — recover and share the value of land and resources and privileges like limited liability, the essential feature of the corporate charter.

Use that revenue to pay citizens a dividend, as Tom Paine suggested. That flow of spending is our commonwealth and we should each be getting a share of it annually, just as Alaskans get a dividend check based on the value of Alaskan oil.

And quit taxing earnings. Then companies could afford to hire more workers (even though jobs are not an end in themselves) and savers would be more willing to invest in new enterprises. By shifting taxes off wages, onto rents, we could just about kiss the job fetish and the spending fetish goodbye.

Joel is a writer focusing on US politics, government, and culture. He was formerly a full professor at the University of Wisconsin, Madison, a senior staffer for the U.S. Congress (Office of Technology Assessment), head of an environmental consulting company, and Director of Environment, Energy and Natural Resources at the National Governors Association. His latest book is Delusional Democracy – Fixing the Republic Without Overthrowing the Government. He is a co-founder of Friends of the Article V Convention, its National Press Secretary, and writes regularly for many websites.

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Arts & Letters

Geonomics is …

what you do when you see economies as part of the ecosystem, following feedback loops and storing up energy. Surplus energy – fat or profit – enables us to produce and reproduce. To recycle society’s surplus, the commonwealth, geonomics would replace taxes with land dues (charged to users of sites and resources, in-cluding the EM spectrum, and extra to polluters), and replace subsidies with rent dividends to citizens (a la Alaska’s oil dividend). Without taxes and subsidies to distort them, prices become precise, reflect accurately our costs and values; then, motivated by no more than the bottom line, both producers and consumers make sustainable choices. While no place uses geonomics in its entirety, some places use parts of it, most notably a shift of the property tax off buildings, onto locations. Shifting the property tax drives efficient use of land, in-fills cities, improves the housing stock, makes homes affordable, engenders jobs and investment opportunities, lowers crime, raises civic participation, etc – overall it makes cities more livable. Geonomics – a way to share the bounty of nature and society – is something we can work for locally, globally, and in between.

a scientific look at how we divvy up the work and the wealth, how some of us end up with too much or too little effort or reward. That’s partly due to Ricardo’s Law of Rent, showing how wasteful use of Earth cuts wages. And it’s partly due to how a society’s elite runs government around like water boys, dishing out subsidies and tax breaks. While geonomists look political reality right in the eye, without blinking, conventional economists flinch. When Paul Volcker, ex-chief of the Federal Reserve, moved on to a cushy professorship at Princeton cum book contract, the crush of deadlines bore down. So Volcker asked a junior associate to help with the book. The guy refused, explaining that giving serious consideration to policy would ruin his academic career. The ex-Fed chief couldn’t believe it and asked the department chair if truly that were the case. That head honcho pondered the question then replied no, not if he only does it once. And economics was AKA political economy!

not a panacea, but like John Muir said, “pull on any one thing, and find it connected to everything else.” Recall last month’s earthquake in El Salvador. We felt it and its formidable after-shocks in Nicaragua. Immediately afterwards, my host nation, one of the poorest in the Western Hemisphere, sent aid to its Central American neighbor. The Nica newspapers carried photos of the devastation. They showed that the cliff sides that crumbled had had homes built on them while the cliffs left pristine withstood the shock. Could monopoly of good, safe, flat land be pushing people to build on risky, unstable cliffs? If so, that’s just one more good reason to break up land monopoly. What works to break up land monopoly, history shows, is for society to collect the annual rental value of the underlying sites and resources. That’d spur owners to use level land efficiently, so no one would be excluded, forced to resort to cliffs. To prevent another man-induced landslide is yet another reason to spread geonomics.

an economic policy based on the earth’s natural patterns. Eco-systems self-regulate by using feedback loops to keep balance. Can economies do likewise? Why don’t they now produce efficiently and distribute fairly? The answers lie in the money we spend on the earth we use. To attain people/planet harmony, that financial flow from sites and resources must visit each of us. Our agent, government, must collect this natural rent via fees and disburse the collected revenue via dividends. And, it must forgo taxes on homes and earnings, and quit subsidies of either the needy or the greedy. As our steward, government must also collect Ecology Security Deposits, require Restoration Insurance, and auction off the occasional Emissions Permit. And that’s about it – were nature our model.

a way to connect the dots. Making the cyber rounds is “The Cavernous Divide” by Scott Klinger, from AlterNet (posted March 21): “As the number of billionaires in the world expands, so does the number of those in poverty.” Duh. The yawning income gap is not news. Nearly every issue of our quarterly digest carries a similar quote. Yet the connection was worked out long ago by one of America’s greatest thinkers, Henry George, who labeled his masterpiece, Progress and Poverty. Techno- and socio-advances always enrich few and impoverish many. Yet progress also pushes up location values – the geonomic insight (is Silicon Valley cheaper now or more expensive?). Instead of taxing income, sales, or buildings, society could collect those values of sites, resources, EM spectrum, and ecosystem services via fees and dues, which would lower the income ceiling, and instead of lavishing corporate welfare, pay out the recovered revenue via dividends, which would jack up the income floor. Dots connected.

shaped by reality. In the 1980′s, the Swedish government doubled its stock transfer tax. Tax receipts, however, rose only 15%, since traders simply fled to London exchanges. Fearing a further exodus, the Swedish government quickly rescinded the tax altogether. (The New York Times, April 20) That willingness to tax anything leads us astray. Pushing us astray is that unwillingness to pay what we owe: rent for land, our common heritage. Assuming land value is up for grabs, we speculate. We cap the property tax on both land and buildings and the rate at which assessments can go up; while real market values rise quicker, assessments can never catch up. Our stewards, the Bureau of Land Management, routinely sell and lease sites below market value, often to insiders, says the Government Accounting Office. Once we grasp that rent is ours to share, we’ll collect it all, rather than let it enrich a few, and quit taxing earnings, which do belong to the individual earner. That shift is geonomic policy.

of interest to Dave Lakhani, President Bold Approach (Mar 8) and Matt Ozga (Jan 29): “I write for the Washington Square News, the student run newspaper out of New York University. Geonomics seems like it has great significance, especially in this area. When was geonomics developed, and by whom?”
About 1982 I began. Two years later, Chilean Dr Manfred Max-Neef offered the term geonomics for Earth-friendly economics. In the mid-80s, a millionaire founded a Geonomics Institute on Middlebury College campus in Vermont re global trade. In the 1990s, CNBC cablecast a show, Geonomics, on world trade as it benefits world traders. My version of geonomics draws heavily from the American Henry George who wrote Progress & Poverty (1879) and won the mayoralty of New York but was denied his victory by Tammany Hall (1886). He in turn got lots from Brits David Ricardo, Adam Smith, and the French physiocrats of the 1700s. My version differs by focusing not on taxation but on the flow of rents for sites, resources, sinks, and government-granted privileges. Forgoing these trillions, we instead tax and subsidize, making waste cheap and sustainability expensive. To quit distorting price, replace taxes with “land dues” and replace subsidies with a Citizens Dividend.
Matt: “This idea of sharing rents sounds, if not explicitly socialist, at least at odds with some capitalist values (only the strong survive & prosper, etc). Is it fair to say that geonomics has some basis in socialist theory?”
A closer descriptor would be Christian. Beyond ethics into praxis, Alaska shares oil rent with residents, and they’re more libertarian than socialist. While individuals provide labor and capital, no one provides land while society generates its value. Rent is not private property but public property. Sharing Rent is predistribution, sharing it before an elite or state has a chance to get and misspend it, like a public REIT (Real Estate Investment Trust) paying dividends to its stakeholders – a perfectly capitalist model. What we should leave untaxed are our sales, salaries, and structures, things we do produce.

a POV that Spain’s president might try. A few blocks from my room in Madrid at a book fair to promote literacy, Sr Zapatero, while giving autographs and high fives to kids, said books are very expensive and he’d see about getting the value added tax on them cut down to zero. (El Pais, June 4; see, politicians can grasp geo-logic.) But why do we raise the cost of any useful product? Why not tax useless products? Even more basic: is being better than a costly tax good enough? Our favorite replacement for any tax is no tax: instead, run government like a business and charge full market value for the permits it issues, such as everything from corporate charters to emission allowances to resource leases. These pieces of paper are immensely valuable, yet now our steward, the state, gives them away for nearly free, absolutely free in some cases. Government is sitting on its own assets and needs merely to cash in by doing what any rational entity in the economy does – negotiate the best deal. Then with this profit, rather than fund more waste, pay the stakeholders, we citizenry, a dividend. Thereby geonomics gets rid of two huge problems. It replaces taxes with full-value fees and replaces subsidies for special interests with a Citizens Dividend for people in general. Neither left nor right, this reform is what both nature lovers and liberty lovers need to promote, right now.

close to the policy of the Garden Cities in England. Founded by Ebenezer Howard over a century ago, residents own the land in common and run the town as a business. Letchworth, the oldest of the model towns, serves residents grandly from bucketfuls of collected land rent (as does the Canadian Province of Alberta from oil royalty). A geonomic town would pay the rent to residents, letting them freely choose personalized services, and also ax taxes. Both geonomics and Howard were inspired by American proto-geonomist Henry George. The movement launched by Howard today in the UK advances the shift of taxes from buildings to locations. A recent report from the Town and Country Planning Association proposes this Property Tax Shift and their journal published research in the potential of land value taxation by Tony Vickers (Vol. 69, Part 5, 2000). (Thanks to James Robertson)

a way to connect the dots. Making the cyber rounds is “The Cavernous Divide” by Scott Klinger, from AlterNet (posted March 21): “As the number of billionaires in the world expands, so does the number of those in poverty.” Duh. The yawning income gap is not news. Nearly every issue of our quarterly digest carries a similar quote. Yet the connection was worked out long ago by one of America’s greatest thinkers, Henry George, who labeled his masterpiece, Progress and Poverty. Techno- and socio-advances always enrich few and impoverish many. Yet progress also pushes up location values – the geonomic insight (is Silicon Valley cheaper now or more expensive?). Instead of taxing income, sales, or buildings, society could collect those values of sites, resources, EM spectrum, and ecosystem services via fees and dues, which would lower the income ceiling, and instead of lavishing corporate welfare, pay out the recovered revenue via dividends, which would jack up the income floor. Dots connected.